Suncor is expecting all of its oil sands operations to be producing at normal rates by the end of June after a wildfire shut down operations last month. National Defence photo.

Suncor oil sands operations halted for weeks due to out of control blaze

By Eric M. Johnson

CALGARY, Alberta, June 14 (Reuters) – Suncor Energy Inc has told employees the massive wildfire that struck northern Alberta in May will cost the company nearly C$1 billion ($777.91 million), two sources at Canada’s largest crude producer said on Tuesday.

The wildfire, which forced the evacuation of the oil sands hub of Fort McMurray, also shuttered operations at facilities owned by Suncor and other producers in the region for weeks, at one point cutting Canada’s crude output by more than a million barrels a day.

The Suncor number is the first concrete figure to emerge from oil sands companies on the scale of their wildfire costs. With some companies still ramping up production, the overall cost of the natural disaster has not been determined.

Analysts pegged oil companies’ pre-tax profit loss at $45-$50 million a day during the wildfire shutdowns.

Husky Energy and Cenovus Energy Inc said on Tuesday wildfire costs would not be substantial, though the companies declined to provide an estimate.

Barclays analyst Paul Cheng said Suncor’s pre-tax losses were probably close to C$1 billion, although the long-term impact would be limited.

“It’s going to be a really messy and very difficult second quarter in the case of Suncor,” Cheng said. “But everyone is quite confident by the end of the month they should be up to normal operations, and if that’s the case this is a one-quarter event and investors will not put too much weight on that.”

At Suncor, one worker, who declined to be named because he was not authorized to speak to reporters, said an executive told employees on Monday that the company expects fire-related losses “just shy” of C$1 billion.

A second employee, also speaking on condition of anonymity, said workers were told that direct costs related to the fire and the loss of production would cost nearly C$1 billion.

A Suncor spokeswoman declined to comment on wildfire-related losses.

Suncor has several oil sands facilities, including the main mining site which has the capacity to produce up to 350,000 barrels per day.

Last week Suncor said it expected to have its base plant operations back to pre-fire production rates within a week and all operations in the region producing at normal, pre-turnaround rates by the end of June.

The sources said they were told that the company’s thermal operations were not coming back online as quickly as hoped because of blockages, likely stemming from the shutdown of steam injections that melt the tarry bitumen in reservoirs.

But they were also told Suncor had as much as six months’ worth of available inventory at its main mining site, more than the typical amount of roughly two months.

A third Suncor employee, who also declined to be named, said by email that he was told the company saw “significant losses” that could stretch beyond the nearly C$1 billion disclosed at Monday’s meeting, a large portion of which was due to flying workers to and from facilities, and employee lodging.

“We have lost major production but we do have four to five months of ore and we are slowly ramping back up operations,” the employee said.

Suncor spokeswoman Sneh Seetal declined to comment on specifics of operations but said the broader effort to bring production online was on track.

“Our return to operations is going as planned,” she said. “We are bringing these operations back.”